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5 Things to Watch in Morgan Stanley Earnings

The Wall Street Journal
Updated

Morgan Stanley is expected to announce its first-quarter earnings before the market opens on Monday, with expectations of slight improvements from the year-earlier period. The Fed recently approved Morgan’s revised proposals to buy back as much as $3.1 billion in company stock between the second quarter and the end of the same period a year later–more than triple its $1 billion buyback of last year–and to boost its quarterly dividend to 15 cents a share from 10 cents.

#1: Earnings Forecast

Morgan Stanley is expected to earn 78 cents a share, the average estimate of analysts polled by Thomson Reuters. The firm, which reported a 74-cent profit a year ago, hasn’t provided any forecasts for its first-quarter results.

#2: Revenue Forecast

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Analysts predict Morgan Stanley will report revenue of $9.17 billion, up from the $8.93 billion the firm tallied a year ago.

#3: Happy Returns on ROE?

Morgan Stanley’s chairman and chief executive, James Gorman, has pledged to lift the firm’s return on equity, a key measure of banks’ profitability, to at least 10%. It’s proven elusive, though he’s been getting closer, producing a return of more than 8% in 2014. Investors are hoping he gets there in 2015.

#4: Trading Places

New rules on bank capital and risk-taking have drained profitability from Wall Street, leading banks such as Morgan Stanley to pull back from some of its trading businesses. The strategy has looked prescient in recent years, amid a slump in client activity. In the first quarter, though, markets perked up, and rivals such as Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. were rewarded for sticking it out. Investors are eager to hear how Morgan Stanley’s revamped business fared in better times.

#5: The New Guy

Ruth Porat, Morgan Stanley’s finance chief, will leave the firm soon to take the same post at Google Inc. Her replacement is Jonathan Pruzan, an investment banker who, as Ms. Porat once had, co-led the team that advises banks and other financial-services companies.